STEP 6
FINANCING THE UNFINANCABLE
LETS SAY YOU COME ACROSS A WONDERFUL OPPORTUNITY TO PURCHASE A HOME THAT IS IN SUCH A DISTRESSED CONDITION, THAT IT'S NOT MORTGAGABLE.YOUR FINANCES MIGHT NOT ALLOW YOU TO PURCHASE ALL CASH .WELL, THERE ARE OPTIONS,SOME MORE COSTLY THAN OTHERS .THIS DIAMOND WAITING TO SHINE HAS A HUGE MARGIN FOR YOU AT THE END OF THE RAINBOW.
.HERE'S ARE 2 OPTIONS YOU HAVE TO BEAT THE CHALLENGE.
1.PRIVATE MONEY LENDER(HARD MONEY).
IN TODAYS WORLD OF FLIPPING THERE ARE PLENTY OF PRIVATE COMPANIES WILLING TO LEND.THEIR FEES VARY,SO BE CAUTIOUS AND MAKE SURE YOUR ATTORNEY GETS INVOLVED PRIOR TO MAKING ANY DECISIONS.
TYPICALLY PRIVATE LENDERS WILL LEND BETWEEN 60 % - 80% LTC (LOAN TO COST).ON A 300K HOUSE THE LENDER WILL FUND $180K - $240K.
HARD MONEY LENDERS WILL CHARGE A HIGHER INTEREST RATE..I PLACED A FEW CALLS YESTERDAY FROM A TRADE MAGAZINE INQUIRING ABOUT RATES AND TERMS.( MOST LOANS WILL BE INTEREST ONLY FOR A 1 YEAR TERM TYPICALLY). I WAS QUOTED ANYWHERE FROM 12 % AND 6 POINTS TO 18% AND 1POINT AND A FEW OTHERS IN THE MIDDLE.WHEN BORROWING THIS WAY THERE WILL USUALLY BE A MINIMUM NUMBERS OF MONTHS YOU MUST GAURANTEE(3-6).
2.EQUITY PARTNER.
TYPICALLY AN EQUITY PARTNER WILL FINANCE A HIGHER "LTC" ,BUT WILL ALSO TAKE A PIECE OF THE ACTION. AN EXAMPLE MIGHT BE :
THE SAME $300K HOUSE AT A LTC OF 90% W/ AN INTEREST ONLY LOAN @ 12% PLUS 30 % OF THE PROCEEDS.
BOTH OPTIONS WILL HAVE ADDITIONAL FEES.BE PREPARED TO COVER LEGAL FEES FOR THE LENDER,APPRAISAL FEES,MORTGAGE TAX,RECORDING FEES.
I KNOW IT SOUNDS LIKE HIGHWAY ROBBERY ,BUT TAKE AN OBJECTIVE LOOK FROM THE OUTSIDE FOR A SECOND .
YOU HAVE A HOME THAT WILL YIELD A WONDERFUL MARGIN,BUT YOU DON'T HAVE THE FINANCES IN PLACE TO CARRY OUT THE TRANSACTION.
DO YOU WALK AWAY OR GO "OPM" OTHER PEOPLES MONEY. I BELIEVE IN IT'S BETTER TO HAVE PIECE OF THE PIE THAN NONE.
HAPPY FLIPPING....RON MOLCHO MANAGING BROKER @ AMERICAN HOMES OF SI
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